Petrobras Concentrates Efforts on Pre-Salt and Becomes Leaner

As the world’s major oil companies diversify and expand their presence in the petrochemicals and renewables segments, Petrobras is moving towards becoming a less and less verticalized company. Owner of one of the industry’s most coveted assets (read the pre-salt), the state oil company focuses on oil and gas production and prepares an aggressive asset sale plan to reduce its debt and increase its profitability. At the same time, the company distances itself from promising businesses and has been raising the interest of its global counterparts, in the face of expectations of a fall in fossil fuel consumption in the long run.

Roberto CastelloBranco took over Petrobras in January with the speech that the company needs to focus on its core business. In two months, the executive has already expressed his intention to sell Braskem and Liquigás, in addition to reducing the state’s share of the refining and BR Distribuidora.

“Strategically, we want the company to generate value for the shareholders, for Brazil. To do this, we have to substantially improve the allocation of capital, directing it to the best uses, the assets where we are natural owners, the ones where we get to extract the maximum possible return, and this is mainly in the exploration and production of oil and gas, “he told a news conference a few weeks ago.

Analysts consulted by Valor are divided on strategy. For the director of the Brazilian Center for Infrastructure (CBIE), AdrianoPires, the focus on the pre-salt is correct. He points out that the company has gone through a financial crisis and still has a net debt of $ 69.4 billion to reduce.

“Petrobras has left the ICU, but it is still in the hospital. It needs to be rebuilt and this is going through the difficult exercise of getting out of some assets,“ says Pires.

The Institute of Petroleum, Natural Gas and Biofuels Strategic Studies Zé Eduardo Dutra (INEEP), linked to the Federation of Petroleum Workers (FUP), argues that Petrobras has been able to reduce its debt, largely due to the organic generation of cash, without the need to sell all the assets it promised. In 2018, benefited by the rise in oil prices, the company reached its goal of deleveraging, even though it only fulfilled one-third of the divestment plan.

The institute also points out that, while oil remains at the center of its strategies, large global oil companies have expanded their presence in sectors such as petrochemicals (such as ExxonMobil and Shell) and renewable energy (BP, biofuels, Equinor and Total, in solar and wind).

“It may make sense for Petrobras to re-invest in petrochemicals and biofuels in the future, but not today. Petrobras cannot have the same investment approach as other oil companies, they are different realities, “said Pires, who also questioned the quality of the company’s past investments in ethanol and biodiesel. “They were successive losses,“ he said.

In December, under the previous management, Petrobras announced plans to invest US $ 400 million in renewables by 2023, but CastelloBranco preaches caution. According to him, the company maintains lines of research in renewable, but the perspectives of the company for the sector are of long term. “Our competence is the exploration and production of oil and gas. Nothing indicates that we will have the same advantages in the solar and wind energy business,“ he said in the press conference.